METALS/MINERS SHIFTING GEARS – ARE YOU READY FOR WHAT’S NEXT? – PART I – December 17, 2020
The recent bottom in Metals/Miners has everyone excited to see what this next upside price leg is capable of achieving. The extended Pennant/Flag formation that setup a peak in August 2020 has nearly reached the Apex. The upside move in Gold and Silver, as well as Junior Miner ETFs, over the past few weeks suggests a new upside price trend is setting up. The concept that commodities and metals are very new to historically low price levels sets up expectations that a longer-term price advance could send Gold above $3750 and send Silver above $50 as expectations adjust to the new price cycles.
WHERE ARE WE IN THE COMMODITY/METALS CYCLE?
Some of my team’s recent research has highlighted our belief that we are just starting a Depreciation cycle for the US/Global stock market which aligns with the historic lows for Commodities/Metals. Take a look at our analysis of the Gold and the US$ cycle, Gold and the SPY and QQQ, and our price targets for Gold using our proprietary ADL tool for some additional background.
Using our proprietary price modeling and Adaptive Learning technology, we’ve identified a broad market cycle that lasts between 9 to 9.5 years (on average) and we believe a US stock market appreciation phase ended in 2018~2019. We feel the current rally in the US stock market is an “excess phase” (blow off top) rally that may extend well into early 2021 before suddenly shaking out the hype. This same type of enthusiasm is taking place across the globe and in various classes of assets (Cryptos, various market sectors, Metals and Essential Minerals, and others). The US Fed, and global central banks, are fueling the rally with easy monetary policies – attempting to keep the party going.
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We suggest traders watch how hedging instruments react to this excess phase over the next 12 to 24 months. When precious metals, miners and Cryptos (which have now become a new hedging instrument) begin to rally when the US stock market is flat or devaluing – then we may be very close to the end of the excess phase.
BLOOMBERG COMMODITIES INDEX BOTTOM
These long-term Bloomberg Commodities Index and Silver to M2Money Supply charts highlight the extended downtrend in commodities over the past 12 years. Interestingly, this decline in the Commodities Index,hart below, aligns with our longer term Appreciation phase in the US stock market from 2009 to 2018~19.
